NEW YORK (TheStreet) -- Shares of the biotechnology companyPDL BioPharma(PDLI) - Get Report have been on a downward trend since the first week of September 2014, when the price dropped by about 20% in just a few days (see the "A" on the chart below). Since then, the price has been dropping, following the 100-day 100-day moving average, but never breaching it. The price has been rejected by this trend-line four times during the last eight months, and the price is testing it again rigth now at $6.62.
Watching the chart from the other side, there is a strong support line at $6.20 that should tell us what the price will do.
Recently, the company's stock has been bought by an institutional investor Context Capital Management; and one of the reasons is that the company looks very cheap and undervalued at these prices. Its price-to-earnings ratio is hovering around 3.5, while many of its competitors are much higher. It also pays very high dividends, 9.5% last quarter.
The company also has strong returns (return on equity of 92%, return on assets 35%), among the highest compared to competitors.
The company is solid and is trading far below its real value. Buy now for the upside. While you're waiting for pricing trends to reverse, enjoy that high dividend yield.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.